Don’t rely on supplemental income.
In the United States, Americans are afforded the benefit of the social security retirement. This form of public service has since its inception provided citizens of the United States with an income for retirement. However, social security was never designed to be the sole retirement option for a person. As a result, individuals who rely solely on social security often find themselves having to find part-time work when they should be retiring from work all together. Because social security was only designed to supplement income, one should not rely on it as their sole means of retirement.
When the original social security system was designed, it was intended to provide an individual with a personal retirement. This was only intended to be a supplemental income to go with a pension or saving that one might acquire throughout their career. In fact President Roosevelt believed that the program would provide a long-term solution to individuals who lived long enough to receive benefits and were no longer capable of working fulltime (Social Security Administration, 2010). The expectation of social security in its infancy was that a person would receive income for a limited period after retirement and fill the gap between pension or savings and loss of fulltime payroll. People were not intended to collect social security for decades and decades.
From the programs design, it has never fully provided enough income for individual retirement. In 1942 when social security began paying benefits the average payment was $58.06 per month (Social Security Administration, 2010). This was just less than 1/3 of the average monthly income a person in 1940 (Lone Star College, 2010). So from this statistic one can reasonably infer that if you needed an average salary of over $150.00 per month to survive than 1/3 of this income would not sustain the average person.
Another reason that one should not depend upon social security solely for retirement stems from an error made in policies governing the program. This error in social security policy occurred long after the programs start. Social Security was never designed to pay death benefits and disability payments. The Social Security Amendments of 1954 initiated a disability insurance program which provided the public with additional coverage against economic insecurity. On August 1, 1956, the Social Security Act was amended to provide benefits to disabled workers aged 50–64 and disabled adult children. In September 1960 President Eisenhower signed a law amending the disability rules to permit payment of benefits to disabled workers of any age and to their dependents. By 1960, 559,000 people were receiving disability benefits, with the average benefit amount being around $80 per month (Social Security Administration, 2010). The major issue with paying benefits of this nature is that the benefits are derived from the social security tax of other workers. In essence the program was paying money to individuals who were either incapable of paying into the program or paid in too little. Yet this problem would not become completely apparent until the early 80’s. This problem was brought to light because the life expectancies of beneficiaries became a problem during this time. Essentially before the 1980’s and even 1970’s individual were not expected to live beyond 15 to 20 years after retirement. But due to the extension of life spans, retirees would begin draining the system faster coupled with the payment of disability insurance (Social Security Administration, 2010).
As a result of population growth and the increased life spans of individuals, Social Security became embroiled in debate in the 1980’s over concerns of sustainability (Weaver, 1982) (Social Security Administration, 2010). There are many obvious problems with the current numbers that cannot be overlooked. This controversy culminated into the Contract With America Advancement Act of 1996. This law began steps to severely limit social security disability and place limits on benefits. For instance, disabilities such as those caused from drug addiction would no longer be accepted. Another significant provision of this law doubled the earnings limit exemption amount for retired Social Security beneficiaries, on a gradual schedule from 1996 to 2002. In 2002, the exempt amount will be $30,000 per year in earnings, compared to $14,760 under previous law (Social Security Administration, 2010).
There are still many problems with social security viability that cannot be fixed in the near future through policy change alone. A large cash infusion will need to take place in order to keep the program viable until policy changes have time to take effect. The last two presidents have worked diligently to alter social security and progress is being made. For instance, on December 15, 2009, President Obama signed the “No Social Security Benefits for Prisoners Act of 2009”. The bill prohibits the payment of any retroactive Title II and Title XVI benefits to individuals while they are in prison, are in violation of conditions of their parole or probation, or are fleeing to avoid prosecution for a felony or a crime punishable by sentence of more than one year. However, these changes are slow to come to affect and for those who are nowhere near retirement the need to plan for alternative means of retirement is far more urgent than prior generations. Planning for retirement in many ways should be thought of without the influx of social security. Because of law changes there is no way to predict the future of the program. In this way, any form of strategy which takes in to account the use of social security, is ill conceived due to the programs unreliability. The most fundamentally sound approach to dealing with retirement is to look for solid investments that provide tax incentives and to dismiss social security as an objective for financial planning.
Lone Star College. (2010). American cultural history. Retrieved from http://kclibrary.lonestar.edu/decade40.html
Social Security Administration. (2010). Historical background and development of social security. Retrieved from http://www.ssa.gov/history/briefhistory3.html
Weaver, Carolyn, “The Crisis in Social Security: Economic and Political Origins,” Duke Press Policy Studies, 1982.